Setting up self-employed & freelancer taxes in Lithuania

Self-employed foreigners and Lithuanians alike must register with the State Tax Inspectorate (VMI), declare their income, pay taxes, and comply with any other legal requirements.

Before kicking off with self-employment, you’ll first have to establish whether your work falls under an individual activity certificate (individuali veikla) or a business licence (verslo liudijimas).

Individual activity

• independent commercial or production activities of any nature, including business activities under business certificates (manufacture of textiles, repair activities, etc.);
• independent creative work, professional and other similar independent activities, including business activities under business certificates (lawyers, notaries, etc.)
• independent sport activities;
• independent performers’ activities (actors, musicians, etc.)

Business license

• In order to obtain a business license, you must first check whether business licenses are issued for the activity you have chosen. The list of activities which can be carried out under a business license can be found here . The amount of the business license fee may depend on the choice of activity type or sub-type. This amount also depends on the period of validity of the business license. A business license is limited to certain activities listed in the classification of business license s .
• Business licenses may be issued for a desired period of a calendar year, which may not extend beyond the end of the same calendar year. Commercial business licenses are issued for a desired period of a calendar year, calculated in days. The shortest possible period is one day. Service and production business licenses are issued for a desired period of a calendar year (calculated in days) but not for more than one calendar year and not for less than 5 calendar days, which do not have to be consecutive.
• Income earned from a separate activity under a business license is subject to income tax at the established rate payable before the date of issue of the business license. The rates of the fixed income tax are determined by the council of each municipality annually.

Taxes

Under an individual activity certificate, annual income not exceeding 20,000 euros is taxed at a rate of 5 percent, and 15 percent when the annual income is higher than 20,000 euros (where profits reach 35,000 euros per year). The tax on self-employment under a business licence is fixed and calculated daily.

Restrictions

An individual activity certificate allows for all activities except those that require the establishment of a company. A business licence is permitted if income from the activity does not exceed 45,00 euros per calendar year.

Residents who have obtained a business licence can provide services and sell their manufactured goods to legal entities if the type of activity indicated in the business licence is not the same as the activity carried out by that legal entity.

Paying taxes

If you are self-employed under a business licence or individual activity certificate, your taxes will consist of:

– Personal Income Tax ;

– Compulsory Health Insurance contributions;

– State Social Security contributions;

– In some cases, Value Added Tax .

If you’re a permanent resident of Lithuania, you must take care of your taxes even if you decide to work abroad for a while. In other words, all income of Lithuania’s permanent residents, received in and outside the country, must be considered subject to income tax in Lithuania.

If you earn income in a foreign country, which has a treaty with Lithuania to avoid double taxation, the issue of this income being subject to taxation in Lithuania must be in line with the provisions of the treaty.

Declaring your income

The most convenient way to submit your income tax return is by logging into the Electronic Declaration System . Personal Income Tax returns are completed using an easy-to-navigate guide. Once the tax return has been generated, the amount to be refunded or paid is immediately displayed. When there is an amount due, it can be paid via e-banking.

More information on income declaration and answers to frequently asked questions can be found on the State Tax Inspectorate (VMI) website .

VAT

If you are selling services to cross-border customers, you are obliged to apply for VAT number and include it in commercial documentation, like invoices.

Alternatively, you can use Abillio - invoicing and tax compliance service for cross-border freelancing. In Abillio's case, you don't need to establish a legal entity, open bank account or apply for VAT - with Abillio's company-as-a-service solution you can start your freelancing business right away. Register your free account here >>

Note: This information is from official sources and should not be considered as a substitute for legal advice. Always check official websites or consult a lawyer or tax consultant before taking action.